Tappahanna tax ditch treasurer allegedly embezzled nearly $125,000

A Hartly man is accused of embezzling nearly $125,000 from the Tappahanna tax ditch account over the last five years.

Sarah Barbansarah.barban@doverpost.com@SarahDoverPost

A Hartly man is accused of embezzling nearly $125,000 from the Tappahanna tax ditch account over the last five years.

Jeffery Cox was the treasurer of the tax ditch account from 2006 until 2013, when his access to the account was terminated. Soon after, the Department of Natural Resources and Environmental Control received a tip alleging that funds from the tax ditch had been misspent.

DNREC then turned the investigation over to the Delaware Office of Auditor of Accounts, which issued a report on the allegations June 11.

The Tappahanna tax ditch is located west of Dover and runs parallel to Del. Route 8 for roughly six and a half miles. A tax ditch is created when a group of homeowners petition Superior Court to create a trench to alleviate drainage problems. If the ditch is deemed necessary, a tax ditch organization is created and a ditch tax is added to the property tax bills of property owners in the ditch’s watershed. The tax is collected by the county and then given to the tax ditch organization, which uses the funds to pay for construction and maintenance of the channel.

The Tappahanna tax ditch typically collected roughly $5,600 annually, according to the state auditor’s report.

Cox had sole authority over the tax ditch funds, meaning a co-signer was not needed to authorize transactions for the account. That allowed Cox to withdraw funds, liquidate assets and even have a debit card issued for the account, according to the report.

The alleged embezzlement began March 18, 2009, when Cox purchased a certificate of deposit for the account and withdrew $300 in cash at the same time. In the two weeks following the first withdrawal, Cox allegedly took $12,000 from the tax ditch operating account, according to the report.

From 2009 until 2013 Cox allegedly withdrew more than $90,000 in cash and made more than $30,000 in purchases.

In August of 2013, Cox obtained a debit card for the account and soon thereafter took a trip to Key West, Fla., where he reportedly spent $200 in tax funds on a tattoo, $1,200 on tourist outings and $875 at an adult entertainment club.

In total, Cox is accused of embezzling $78,870 using the card.

Fellow managers of the tax ditch and landowners were reportedly unaware of the missing funds because bank statements were mailed to Cox. He later withheld those bank statements from the financial reports he provided at annual tax ditch meetings, according to the report.

At one point the tax ditch’s account was closed because it had been overdrawn for more than 30 days. About a month later, Cox paid the balance owed to the bank, just in time for the account to be reopened and receive the deposit of tax funds from Kent County.

During an April interview with the state auditor’s office, Cox reportedly admitted he put his own money in the account and took money out without the tax ditch managers’ knowledge or authorization.

“I co-mingled funds and used that checking account to purchase things on my own,” he reportedly told investigators.

During his time as treasurer, Cox allegedly deposited $46,640 into the account, including $32,466 in retirement funds he received after being terminated by a previous employer.

Cox continued to spend money out of the tax ditch account until Dec. 31, 2013, when his access was terminated, the report states.

“The Auditor's report contains very serious allegations,” said Jason Miller, a spokesman for Attorney General’s office. “The Department of Justice has been aware of the Auditor’s investigation and is reviewing its findings at this time.”

State Auditor Tom Wagner said there is a hope that some money will be recouped and returned to the tax ditch account.

“Assuming he’s guilty, he was stealing from the taxpayers,” he said. “In cases like this you’re stealing from your neighbors, you’re not stealing from everybody in state or in the country. You’re stealing from neighbors directly. We have to clearly demonstrate if you do that, you will get caught and there will be a penalty.”